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BOTTOM LINE: Overall, last week's market performance was positive considering recent gains, worries over GM and weaker data from the housing sector. The advance/decline line rose, most sectors gained and volume was about average on the week. Measures of investor anxiety were mostly lower. The AAII % Bulls fell for the week, which is a positive, but is still at above average levels. I would only become worried over this gauge on sustained readings above 60. The average 30-year mortgage rate rose to 6.37% which is 116 basis points above all-time lows set in June 2003 and the highest since June of last year. Mortgage rates will likely head lower over the intermediate-term. The benchmark 10-year T-note yield fell 7 basis points on the week as multiple inflation readings decelerated and a report showed international demand for US assets increased to record levels. Tech and cyclicals outperformed on increased optimism over US economic growth and accelerated corporate spending. The US dollar rose slightly on the week as optimism over US economic growth relative to that of other developed nations and increasing demand for US assets more than offset expectations of a European Central Bank rate hike. Gold jumped, notwithstanding the decelerating inflation data, on Middle Eastern diversification out of oil and the euro and into the precious metal. Unleaded Gas futures continued their recent collapse, now falling 50% since September highs even as refinery utilization still remains below normal as a result of the hurricanes. Moreover, natural gas supplies increased again this week even as 36% of daily Gulf of Mexico production remains shut-in. Natural Gas has now dropped 22.6% from recent highs. I continue to believe global energy demand destruction and a substantial increase in supplies into 2006 will continue pushing energy prices substantially lower over the intermediate-term. I also still expect the S&P 500 to end the year strongly, finishing with around a 10% gain. The index is currently up 4.7% for the year.
*5-day % Change
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